Valoración de flujos de caja en inflación. El caso de la regulación en el Banco Mundial
[Cash Flow Valuation in an Inflationary World. The Case of World Bank for Regulated Firms]
We show that project evaluation should be based on free cash flows at nominal prices. We present a case where the results from the constant price method are biased upwards and there is a risk to accept bad projects. It is a widespread practice to evaluate projects at constant prices. With an example presented in the training on economic regulation of public utilities developed by the World Bank Institute we asses that methodology. We show an overvaluation of 21% when compared with the current prices methodology and using a correct Weighted Average Cost of Capital, WACC.
|Date of creation:||24 Feb 2005|
|Date of revision:||05 Jan 2009|
|Publication status:||Published in Academia. Revista Latinoamericana de Administración, CLADEA 36 (2006): pp. 24-49|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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- Estache, Antonio & Rodriguez Pardina, Martin & Rodriguez, Jose Maria & Sember, German, 2003. "An introduction to financial and economic modeling for utility regulators," Policy Research Working Paper Series 3001, The World Bank.
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